Canada's 'Ugly' Growth Experience: A Warning for Australia?
Canada's recent economic downturn has shed light on a concerning trend: the country's GDP growth has long been artificially boosted by immigration, rather than genuine economic productivity or rising living standards. This revelation has sparked important discussions about the sustainability of such growth and its implications for other nations, particularly Australia.
The Canadian Conundrum
The National Post's article highlights a stark reality: Canada's economy has been expanding primarily due to population growth, not because of increased productivity or improved living standards. This is evident in the post-COVID era, where GDP increases were largely driven by adding millions of new consumers, including temporary workers, students, asylum seekers, and permanent residents.
The Fraser Institute's data is particularly striking. From 2020 to 2024, Canada's population grew by 6.4%, while GDP growth lagged at 6%, resulting in the worst five-year decline in per-capita GDP since the Great Depression. This phenomenon, dubbed 'ugly' growth, reveals the fragility of an economy that relies heavily on immigration.
Lessons for Australia
Australia's situation is eerily similar. Over the past 15 quarters, the country has endured 10 quarters of negative GDP per capita growth. The Albanese Labor government's record net overseas migration, averaging 1,162 per day since taking office, has masked a decline in real per capita GDP. This surge in population growth has also coincided with a poor showing in labor productivity growth, ranking among the lowest in the OECD post-pandemic.
The longer-term trend is equally concerning. Since the mid-2000s, when net overseas migration was more than doubled, Australia's productivity and per capita GDP growth have been in secular decline. This shift from investment-led, productivity-based growth to low-productivity, immigration-driven growth has now led to a retreat in living standards.
A Cautionary Tale
The Canadian experience serves as a stark warning for Australia. Both nations have traded long-term economic sustainability for short-term gains, and both are now facing the consequences. As immigration continues to be a key driver of GDP, the underlying weakness in productivity and living standards may remain hidden. However, as we've seen in Canada, the moment immigration is reduced, the true state of the economy becomes evident, and the consequences can be severe.
In my opinion, this highlights the importance of reevaluating economic policies that prioritize short-term growth over long-term sustainability. Australia must learn from Canada's 'ugly' growth experience and consider the potential risks of relying heavily on immigration to boost GDP. The future of these nations' economies and living standards may depend on it.
